Accounting for Property, plant and equipment assets

Hello friends!!!!!!!

Have insights about the purchasing, recording and allocating the cost of property, plant and equipment previously known as fixed or plant asset in balance sheets.

Every business being a going concern requires long-lived assets which are vital for its operations of the firm without disruptions for a long time period; like Building for establishing office or developing a factory, Machinery for converting raw material into finished goods or Plant for processing products, these assets are known as property, plant and equipment also known as plant or fixed assets. They are long-term assets because they cannot be liquated easily; their life is more than one financial year.

Their purchasing is made through the process of capital budgeting, they are purchased or acquired for the purpose of utilizing them over their lifetime period rather reselling them for receiving a stream of services from them; for example a machine’s life could be 5 years so it can facilitate the business for 5 years and a office building can have a life of 20 years so it can give its services for 20 years.  

The term Property, plant and equipment is used to describe all types of plant assets including tangible, intangible assets and natural resources. Its recording is done in the books of acquiring companies as per the rules prescribed under International Accounting Standard (IAS)-16.

v  Tangible plant assets as name indicate, these assets have physical existence and able to give benefits for more than a fiscal year. Like building, land, machines and equipments. They are depreciated over a period of time except Land because Land does not depreciate usually.

• Land; land does not depreciate because it has unlimited life and its value continue to increase with time but the improvements made on Land like fences, Parking facility and fences are subject to depreciation.  

v  Intangible plant assets as the name suggest of these long-lived assets, they do not have any physical existence but they have value for the business and provide benefit to business for more than a fiscal year. That is Patents, goodwill, copyright, trademarks and franchise. They are amortizing over a period.  

v  Natural resources those resources acquired for finding a natural product like a site acquired for extracting natural gas or marbles. They are subject to depletion over the period.